Implications of IFRS 16 adoption : Evidence from Swedish publicly listed firms

Abstract: In this study, we investigate how the implementation of IFRS 16 is affecting the financial statements of Swedish publicly listed firms, and what implications there are for financial statement users. These effects are analyzed by looking at transitional effects on total assets, total liabilities and EBITDA and by comparing different sectors, following estimations of sectoral differences in prior studies (e.g. Fülbier et al., 2008; Morales-Díaz & Zamora-Ramírez, 2018a). As a way of approximating the practical implications of IFRS 16, this study is analyzing changes in the key financial ratios: D/E and EV/EBITDA. We find significant median increases in total assets, total liabilities and EBITDA in the full sample, as well as within each sector group. Further, we confirm the existence of sectoral differences, finding the largest median increases in the Consumer Services sector and the smallest in the Financials sector. We also confirm that IFRS 16 bring new implications for financial statement users, since important and commonly used financial ratios are significantly changed: we observe a significant median increase in the D/E ratio and a significant median decrease in the EV/EBITDA multiple.